Attorney Jerry Schlichter brings another class-action 401(k) suit

Hot on the heels of some big victories, law firm Schlichter Bogard & Denton has filed a new complaint alleging fiduciary breach under ERISA

Dec 23, 2015 @ 12:36 pm

By Greg Iacurci

Jerry Schlichter, the attorney who's grabbed headlines by targeting large corporations and financial services firms in 401(k) suits, filed another such class-action suit today, alleging breach of fiduciary duty as a result of excessive record-keeping fees and use of proprietary investment funds.

The suit, Pledger et al. v. Reliance Trust Co. et al., targets the fiduciaries of the Insperity 401(k) Plan for allegedly causing participants to pay excessive fees to the plan record keeper, Insperity Retirement Services. Insperity Retirement Services is a subsidiary of the plan sponsor, Insperity Inc., a human-resources services provider.

The complaint also alleges that Insperity and Reliance Trust Co., the plan's discretionary trustee, breached their fiduciary duties under the Employee Retirement Income Security Act of 1974 by offering funds with high expenses and poor performance, including proprietary mutual funds and collective investment trusts offered by Reliance. Insperity also failed to adequately monitor Reliance, a fiduciary responsible for investment selection in the plan, according to the complaint.

“We allege that Insperity and Reliance Trust together operated the plan for their own self-interest, sending excessive record-keeping fees to Insperity's in-house record keeper,” said Mr. Schlichter, managing partner at Schlichter Bogard & Denton.

“Reliance Trust was a fiduciary responsible for investment selection and picked its own funds, including target date funds that had only been in existence for less than a week. They performed poorly, had high fees and had no performance history,” he said.

Reliance and Insperity could have selected identical funds with lower fees, but didn't in order to drive revenue-sharing payments to Insperity's record-keeping arm, Mr. Schlichter alleged.

The suit was filed in the U.S. District Court for the Northern District of Georgia, Atlanta Division. Damages are ongoing, Mr. Schlichter said, so the amount of restitution sought by plaintiffs hasn't been calculated yet.

The Insperity 401(k) Plan has approximately $2 billion in assets and more than 85,000 active participants, according to BrightScope Inc.

Mr. Schlichter has gained fame in financial circles for the numerous high-profile 401(k) suits he's spearheaded, dating back to 2006, a common theme of which has been excessive fees paid for record-keeping and investment management services.

This year alone, Mr. Schlichter won the two largest settlements for this type of 401(k) fee case, including $62 million levied against Lockheed Martin Corp. and $57 million assessed from Boeing Co. In May, Supreme Court justices handed him a victory in Tibble v. Edison, saying fiduciaries have an ongoing duty to monitor plan investments.

Mr. Schlichter's firm also has won large settlements against major corporations such as Caterpillar Inc., International Paper Co. and Cigna Corp.

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